Logistics and Phyical Distribution

1489 WordsApr 28, 20086 Pages
An organization focuses on many aspects and strategies that address customers’ needs and wants. The organization develops a product that includes many steps such as, product life cycle, type of brand, packaging and labeling, but the final step is how to have their product accessible to the consumer, which is distribution. A distribution channel is the path where products, including their ownership, flow from producer to consumer. There are many paths an organization can choose to send their product. Physical distribution is the actual movement of products from a producer to consumers. When an organization decides on what distribution channel to use, it creates the final link in the supply chain. A supply chain is the complete order…show more content…
Distribution costs and time is also another factor that the economy plays part it. Because of the requirements of modern distribution, the issue of time is becoming increasingly important in the management of commodity chains. Time is a major issue for freight shipping as it imposes inventory holding and depreciation costs, which becomes sensitive for tightly integrated supply chains (Dr. Jean-Paul Rodrique and Dr. Markus Hesse, “Logistics and Freight Distribution,” 12/30/2007, http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/cn5c4en.html, accessed on April 15, 2008). While the costs of fuel increases, more and more logistic buyers are taking this opportunity to negotiate and renegotiate lower base-rate increases with carriers such as less-than-truckload (LTL). The market is also giving advantages to logistics to negotiate with carriers on fuel surcharges schedules and caps, expecting a longer term benefit if fuel prices continue to increase. A Bears Stearns analysts quoted, “We have heard from both shippers and carriers that the carriers are having more difficulty passing through fuel costs as shippers are increasingly negotiating lower surcharge schedules or capping their existing fuel surcharges, lowering overall pricing in both short-term and long-term.” While trucking rates continue to stay low as their demand is low, high fuel prices and overcapacity remain big problems. With this in mind, many buyers are interested in other options such as rail

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